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The Unemployment Crisis is Several Layers Deep

1/21/2021

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There are roughly 26.8 million Americans who are either fully unemployed or experiencing cuts to hours and pay, with no easy answers on how to fix it.
https://www.statista.com/chart/23900/unemployment-united-states/
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According to December survey data collected by the Bureau of Labor Statistics,

​Roughly 26.8 million Americans are either unemployed, experiencing reduced pay and work hours or have left the labor market entirely.
  • Of the 26.8 million:
    • 10.7 million are officially unemployed,
    • 7.5 million are experiencing cuts to pay and hours,
    • 4.9 million have dropped out of the labor force and
    • 3.7 million are currently misclassified as employed when they’re either unemployed or absent from the labor force.
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PPP, Stimulus Checks, and Unemployment Update

12/22/2020

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https://ramlcpa.link/3d56d | ​Journal of Accountancy

PPP Round 2 will be open to 
  • PPP Round one (1) recipients who,
  • Have 300 or less employees.         
  • Have used or will use the full amount of their first PPP loan.       
  • Can show a 25% gross revenue decline in any 2020 quarter compared with the same quarter in 2019.
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While not law just yet, it is expected to be signed by the president as soon as today.

While we know many key details, there are some key details we don't know, especially regarding the PPP Loan Program. The most pressing in my mind are bank participation and when applications will be accepted as some time will be needed to restart the program.
 
Additional details will be forthcoming and the below summary will probably be updated over the coming days for additional details and clarifications.

Below, I summarize the key provisions in the bill:​

PPP Round 2 & EIDL

 $325 billion in aid for small businesses struggling after nine months of pandemic-induced economic hardships.  
    Allocations           
  • $284 billion to the U.S. Small Business Association (SBA) for first and second PPP forgivable small business loans and 
  • $20 billion to provide Economic Injury Disaster Loan (EIDL) Grants to businesses in low-income communities. 
  • $15 billion in dedicated funding  for shuttered live venues, independent movie theaters, and cultural institutions 
  • $12 billion will be set aside to help business in low-income and minority communities.   

Stimulus Checks

 $166 billion for economic impact payments of          
  • $600 for individuals making up to $75,000 per year and       
  • $1,200 for married couples making up to $150,000 per year, as well as a     
  • $600 payment for each child dependent.     

Supplemental Unemployment

$120 billion to provide workers receiving unemployment benefits a       
  • $300 per week supplement from Dec. 26 until March 14, 2021.       
  • This bill also extends the Pandemic Unemployment Assistance (PUA) program, with expanded coverage to the self-employed, gig workers, and others in nontraditional employment, and the Pandemic Emergency  Unemployment Compensation (PEUC) program, which provides additional weeks of federally funded unemployment benefits to individuals who exhaust their regular state benefits. 
Other Provisions           
               
 $25 billion in emergency rental aid and an extension of the national eviction moratorium through Jan. 31, 2021.  
               
 $45 billion in transportation funding, including          
  • $16 billion for airlines,          
  • $14 billion for transit systems,          
  • $10 billion for state highways,         
  • $2 billion each for airports and intercity buses, and        
  • $1 billion for Amtrak.          
               
$82 billion in funding for colleges and schools, including support for HVAC repair and replacement to mitigate virus transmission, and  
  
$10 billion in child care assistance.          
                           
$22 billion for health-related expenses incurred by state, local, Tribal, and territorial governments.   
               
$13 billion for emergency food assistance, including a 15% increase for six months in Supplemental Nutrition Assistance Program benefits. 
  
$7 billion for broadband expansion.          
               
  The bill also extends the           
  • Employee retention tax credit and several expiring tax provisions
​
​   and temporarily allows a             

Business Meals 100% Deductible

  • 100% business expense deduction for meals (rather than the current 50%) as long as the expense is for food or beverages provided by a restaurant. This provision is effective for expenses incurred after Dec. 31, 2020, and expires at the end of 2022.
  • ​
PPP Round two (2) Who is eligible to apply
PPP Round one (1) recipients (PPP1) may apply for another loan of up to $2 million, provided they:             
  •  Have 300 or fewer employees.         
  •  Have used or will use the full amount of their first PPP loan.       
  •  Can show a 25% gross revenue decline in any 2020 quarter compared with the same quarter in 2019.
  •      
First-time PPP borrowers will also permitted from the following groups:      
  • Businesses with 500 or fewer employees that are eligible for other SBA 7(a) loans.    
  • Sole proprietors, independent contractors, and eligible self-employed individuals.    
  • Not-for-profits, including churches.         
  • Accommodation and food services operations (those with North American Industry Classification System (NAICS) codes starting with 72) with fewer than 300 employees per physical location.  

PPP loan terms           
               
As with PPP Round 1 (PPP1), the costs eligible for loan forgiveness in PPP Round 2 (PPP2) include payroll, rent, covered mortgage interest, and utilities. 
 
PPP2 also makes (adds) the following potentially forgivable:       
  • Covered worker protection and facility modification expenditures, including personal protective equipment, to comply with COVID-19 federal health and safety guidelines.  
  • Expenditures to suppliers that are essential at the time of purchase to the recipient’s current operations.  
  • Covered operating costs such as software and cloud computing services and accounting needs.   
               
To be eligible for full loan forgiveness, PPP borrowers will have to spend no less than 60% of the funds on payroll over a covered period of either eight (8) or twenty-four (24) weeks — the same parameters PPP1 had when it stopped accepting applications in August.
       
PPP borrowers may receive a loan amount of up to 2.5 times their average monthly payroll costs in the year prior to the loan or the calendar year, the same as with PPP1, but the maximum loan amount has been cut from $10 million in the first round to the previously mentioned $2 million maximum. PPP borrowers with NAICS codes starting with 72 (hotels and restaurants) can get up to 3.5 times their average monthly payroll costs, again subject to a $2 million maximum.
 
​

Simplified application and other terms of note              
               
 The new COVID-19 relief bill also:          
  • Creates a simplified forgiveness application process for loans of $150,000 or less. Specifically, a borrower shall receive forgiveness if a borrower signs and submits to the lender a certification that is not more than one page in length, includes a description of the number of employees the borrower was able to retain because of the loan, the estimated total amount of the loan spent on payroll costs, and the total loan amount. The SBA must create the simplified application form within 24 days of the bill’s enactment and may not require additional materials unless necessary to substantiate revenue loss requirements or satisfy relevant statutory or regulatory requirements. Borrowers are required to retain relevant records related to employment for four years and other records for three years, as the SBA may review and audit these loans to check for fraud. 
  • Repeals the requirement that PPP borrowers deduct the amount of any EIDL advance from their PPP forgiveness amount. 
  • Includes set-asides to support first-time and second-time PPP borrowers with 10 or fewer employees, first-time PPP borrowers that have recently been made eligible, and for loans made by community lenders. 
Tax deductibility for PPP expenses
The bill also specifies that business expenses paid with forgiven PPP loans are tax-deductible. This supersedes IRS guidance that such expenses could not be deducted and brings the policy in line with what the AICPA and hundreds of other business associations have argued was Congress’s intent when it created the original PPP as part of the $2 trillion Coronavirus Aid, Relief, and Economic Security (CARES) Act, P.L. 116-136 (see the Dec. 3 letter from the AICPA and state societies to congressional leaders). 
               
The COVID-19 relief bill clarifies that “no deduction shall be denied, no tax attribute shall be reduced, and no basis e shall be denied, by reason of the exclusion from gross income provided” by Section 1106 of the CARES Act (which has been redesignated as Section 7A of the Small Business Act). This provision applies to loans under both the original PPP and subsequent PPP loans.
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Better Peace of Mind in Six Steps

12/4/2020

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https://ramlcpa.link/oue​
Six Ways to Increase Your Financial “Pillow Factor” | Michael Kay
4. Knowing your numbers. While dealing with budgets and financial issues might put you to sleep, nothing adds to greater restfulness than having at least a decent working knowledge of what’s coming in, what’s going out and how you’re moving towards your big goals ...
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It's a fallacy to think that you achieve absolute security and complete peace of mind, especially with your finances. You can prepare and save huge sums of money only to find out it was enough to cover situation X, but situation Y, the one you hadn't considered, not even close. If the pandemic taught us anything, it's that no industry, business, or our economy is immune from significant disruption given the right circumstances. 

That said, there are steps we can take to better address the inherent risk we face in and our lives and especially with our finances,  The below list comes from an article by Michael Kay and while I've used these points when providing professional advice, the way they're stated here is unlike how they're normally presented by an accountant or financial planner. I especially appreciate items #2, #4.and #6 as they don't require a degree in accounting or finance to see their importance.
  1. Having a suitable cushion of liquid savings for emergencies and unanticipated life events, such as job loss, significant cost for a home or car repair, uncovered medical expenses or the ability to help someone in your family who suffers an unexpected loss.
  2. Having your big risks covered. Nothing is more destabilizing to a family than the sudden death or disability of a significant earner. Where and how will the income be replaced when it is suddenly removed from the family’s cash flow?
  3. Keeping your debt in check. Nothing spells insecurity more than facing revolving credit card bills month and after month and never seeing an end in sight.
  4. Knowing your numbers. While dealing with budgets and financial issues might put you to sleep, nothing adds to greater restfulness than having at least a decent working knowledge of what’s coming in, what’s going out and how you’re moving towards your big goals; think retirement security, college for the kids or other meaningful pursuits.
  5. Putting your estate in order. Whether you have big bucks or just getting started, there are really good reasons for having a Will, Powers of Attorney and an Advanced Healthcare Directive. Put a big exclamation point on it if you have children. Making sure you’ve addressed issues like Guardians and Trustees, while it might never be necessary, reaches the highest magnitude of importance if it comes to that.
  6. Being able to talk to your spouse/partner/significant other about money. Let’s face it, we grow up with different understanding and experiences concerning money. Some face poverty and others are raised in wealth; some see flagrant spending, while others see penny-pinching as normal. We all grow into adulthood with a different set of money messages. Having a money conversation that doesn’t cause arguments, discomfort, accusations or frustration is an art, not a science. It requires the willingness and ability to listen and understand another’s point of view without judgement. Once you master the ability to talk about goals, fears, spending, savings and other related money conversations, life becomes easier.

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COLUMBIA MD ACCOUNTANT & CPA FIRM SUMMARY
Travis Raml, CPA & Associates, LLC is an accounting firm in Columbia MD which offers, tax services, outsourced CFO, outsourced controller, businesses advisory, and coaching services to businesses and individuals thorough out the Greater Washington, DC and Baltimore, MD area.

​We also provide service in Ellicott City, Columbia, Annapolis, Severn, Odenton, Crofton, Silver Spring, Rockville, Bethesda, Gaithersburg, Potomac, Reston, Tysons Corner, Fairfax, Alexandria, Arlington. We're also a local cpa firm conveniently located in Columbia Maryland directly across from Columbia Mall.
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Travis Raml, CPA has been an accountant since 1998 and a certified public accountant (CPA) since 2003 and prides his firm on delivering high quality small business CPA services. He specializes in Columbia Tax Preparation, and Columbia Maryland Accounting Firm.

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